The financial press in Canada has been identifying our deficient economic productivity for several years now. In 2012, the Financial Post ran a column entitled "Canada's productivity gap is looking worse than ever." The column noted that "as the predominant measure of standard of living, productivity of labour in Canada has fallen notoriously short of standards set by the U.S. economy."
A year later, little has changed, as reported by a study that identified the "per capita GDP shortfall has more than tripled in the past 30 years and verges on $10,000 a person each year." The report's authors stated that "the productivity gap is an innovation gap."
Clearly, this doesn't sound too promising, but one may ask why a Trustee in Bankruptcy would find the subject of interest. It's an economic issue after all, not a debt issue. The reason is that there may be opportunities to influence our growing debt problems in the country through programs comparable to those used to stimulate our economy's productivity.
Consider the hundreds of government grants and tax credits created to help stimulate innovation, research and development. From the broader Scientific Research and Economic Development (SR&ED) tax credit program to targeted, niche programs like Growing Forward 2 (an agricultural tax credit), a vast array of initiatives exist to stimulate business growth and create jobs. Regardless of opinions as to their effectiveness, the government has implemented programs to address our productivity gap, as it is deemed to be a concern.
So if threats to our standard of living and economic growth have captured our government's attention in the form of numerous and diverse initiatives, have our ballooning personal debt loads garnished an equitable policy response?
Consider the student loan crises. A report from the Canadian Centre for Policy Alternatives released September 11, 2013 noted that university costs have almost tripled in the last 20 years and are expected to climb 8.6 per cent (inflation-adjusted) in the next four years. To fund this skyrocketing tuition, the Canadian Federation of Students reports that the average student's debt is $27,000, after just an undergraduate degree.
Clearly, coming out of school being saddled with onerous debt loads is a significant impairment to one's standard of living. This amount of debt will inevitably hinder consumer spending and have a significant impact on our economy as well.
With this in mind, one could argue that a similar policy approach to that used to improve productivity could be pursued. Maybe tax credits on student loan payments, or a drop in the interest rates charged on them. Maybe some incentives for those entering into science and technology programs in university and college. While "choosing" programs types is not desirable, the approach would at least show a comparable commitment to efforts extended to rectify the productivity gap. With so many students graduating work and not being able to find meaningful work in their field of study, maybe opportunities exist to incentivize employers through tax credits, or similar concepts, to proactively create jobs for these young workers.
Likewise, our government leaders could look to the growing numbers of self-employed. This sector not only is growing, it creates jobs and contributes substantially to the economy. Nonetheless, they face many challenges to their own standard of living that governments could address to support the economy as whole.
Consider something as "simple" as mortgages for the self-employed. After the Finance Minister tightened up mortgage rules to slow the housing market and curb our personal debt binging in Canada, this group of self-employed business owners have found that financial institutions are even more hesitant to give them a mortgage, as compared to employees with a salaried job.
If tax credits and other incentive programs can be formulated to help stimulate our productivity gap, are there similar policies that could find ways to help those looking to start their own business, create jobs and directly impact the economy and productivity? While there are grant programs for this sector, could our policy makers find more ways to help them not only launch successful businesses, but ensure that they are not penalized in the financial markets when they try to buy a home or car and live a normal life?
The personal debt crisis in Canada has the potential to become more daunting on a broader economic and social level as interest rates rise, housing markets soften, post-secondary education costs continue to soar and boomers come to terms with retirement plans that are not as well funded as they need to be.
Perhaps a "rethink" is needed in terms of how we address this debt load conundrum. More than mortgage rules and warnings about debt and spending, maybe programs styled for promoting corporate business growth and productivity improvements can be adapted to directly assist those accumulating debt to get educations, start small businesses and contribute to our economy.